UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

THETHE AES CORPORATIONCORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

NOTICE OF 20102011 ANNUAL MEETING OF STOCKHOLDERS OF THE AES CORPORATION

TO BE HELD ON THURSDAY, APRIL 22, 201021, 2011

March 10, 20102, 2011

TO THE HOLDERS OF COMMON STOCK OF THE AES CORPORATION:

The 2010Notice is hereby given that the 2011 Annual Meeting of Stockholders of The AES Corporation (the “Company” or “AES”) will be held on Thursday, April 22, 2010,21, 2011, at 9:30 a.m. EDT, in the Rotunda Conference Room on the 9^th floor of the Company’s corporate offices located at 4300 Wilson Boulevard, Arlington, Virginia. Doors toVirginia 22203 (in the Annual Meeting will open at 8:30 a.m.

At the Annual Meeting, Stockholders will vote onRotunda Conference Room, 9th floor), for the following matters:purposes, as more fully described in the accompanying Proxy Statement:

Doors to the meeting will open at 8:30 a.m. EDT. Stockholders of record at the close of business on March 8, 2010February 25, 2011 are entitled to notice of, and to vote at, the Annual Meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON THURSDAY, APRIL 22, 2010:

The Proxy Statement, Annual Report on Form 10-K and related proxy materials are available at the following sites: for beneficial holders of AES stock, the site address iswww.edocumentview.com/aes; and for registered holders of AES stock, the site address iswww.envisionreports.com/aes.

Brian A. Miller

Executive Vice President, General Counsel

and Corporate Secretary

EACH STOCKHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A PREPAID ENVELOPE IS ENCLOSED FOR RETURNING PROXY CARDS. ALTERNATIVELY, STOCKHOLDERS MAY VOTE BY TELEPHONE OR VIA THE INTERNET (SEE DIRECTIONS ON THE ENCLOSED PROXY CARD). ANY STOCKHOLDER SUBMITTING A PROXY CARD HAS THE POWER TO REVOKE THE VOTE SET FORTH IN SUCH PROXY CARD AT ANY TIME PRIOR TO THE SUBMISSION OF VOTES AT THE ANNUAL MEETING. STOCKHOLDERS WHO ARE PRESENT AT THE ANNUAL MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON. TO ENSURE THAT YOUR VOTE WILL BE COUNTED, PLEASE CAST YOUR VOTE BEFORE 1:00 AM (EDT) ON APRIL 22, 2010.

TABLE OF CONTENTS

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PROXY STATEMENT

March 10, 20102, 2011

The accompanying Proxy is solicited by the Board of Directors (the “Board”) of The AES Corporation. The ProxyCorporation (the “Company” or “AES”) is solicited for usesoliciting Proxies to be voted on the Stockholders behalf at the 20102011 Annual Meeting of Stockholders of the Company.Stockholders.

The Annual Meeting will commence at 9:30 a.m. EDT on Thursday, April 22, 2010.21, 2011. The Annual Meeting will be held in the Rotunda Conference Room on the 9^th floor Rotunda Conference Room of the Company’s corporate offices located at 4300 Wilson Boulevard, Arlington, Virginia 22203. Any adjournment of the Annual Meeting will be held at the same address. Directions to the Annual Meeting are located on page 10177 of this Proxy Statement.

This Proxy Statement provides information regarding the matters to be voted on at the Annual Meeting as well as other information that may be useful to you. Our Annual ReportIn accordance with rules adopted by the United States Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to each Stockholder of record, we are furnishing proxy materials to our Stockholders on Form 10-Kthe Internet. If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials other than as described below. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your Proxy over the Internet. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the fiscal year ended December 31, 2009Notice of Internet Availability of Proxy Materials.

It is also enclosed with thisanticipated that the Notice of Internet Availability of Proxy Statement.

Materials will first be sent to Stockholders on or about March 7, 2011. This Proxy Statement and accompanying Proxy Card, areAnnual Report on Form 10-K and related proxy materials will first being sentbe made available to Stockholders on or about March 12, 2010.7, 2011 atwww.envisionreports.com/aesfor registered holders of AES stock and, atwww.edocumentview.com/aesfor beneficial holders of AES stock. In accordance with SEC rules, the websites,www.envisionreports.com/aesandwww.edocumentview.com/aes,provide complete anonymity with respect to a Stockholder accessing the websites.

At the close of business on March 8, 2010,February 25, 2011, there were 669,646,588788,253,637 shares of common stock outstanding. Each share of common stock is entitled to one vote.

Questions And Answers Regarding The Proxy Statement And Annual Meeting

WHAT IS THE RECORD DATE?

The record date has been established by the Board as permitted by Delaware law. Owners of record of our common stock at the close of business on the record date are entitled to receive notice of the Annual Meeting. Such owners of record are also entitled to vote at the Annual Meeting and any adjournments of the Annual Meeting. Each share of common stock is entitled to one vote. The record date for the Annual Meeting is March 8, 2010.February 25, 2011.

HOW DOES A STOCKHOLDER SUBMIT A VOTE ON A PROPOSAL?

A Stockholder may vote by marking, signing, dating and returning the enclosed Proxy Card in the enclosed prepaid envelope. Alternatively, a Stockholder may vote by telephone, via the Internet, or in person by attending the Annual Meeting. Only Stockholders registered on the books of our transfer agent may vote in person at the Annual Meeting. Instructions on how to vote by phone or via the Internet are set forth on the enclosed Proxy Card. If a Stockholder owns shares through a broker or other intermediary, voting instructions arewill be set forth on the enclosed voting instruction card.card provided by your broker or other intermediary.

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WHAT ARE THE APPROVAL REQUIREMENTS?

If a Proxy is properly executed, the shares it represents will be voted at the Annual Meeting in accordance with the instructions noted on the Proxy. If no instructions are specified in the Proxy with respect to the matters to be acted upon, the shares represented by the Proxy will be voted in accordance with the recommendations of the Board. The recommendations of the Board regarding the matters to be acted upon at the Annual Meeting are set forth in this Proxy Statement. Each share of common stock is entitled to one vote on each proposal contained herein. For any proposals,proposal, except as otherwise provided by law, rule, AES’ Sixth Restated Certificate of Incorporation or our Amended and Restated Bylaws (“Bylaws”), the affirmative vote of a majority of the shares of common stock present in person or represented by Proxy at the meeting and entitled to vote on the matter is required for approval. Inapproval except for the case(non-binding) advisory vote on the frequency of the proposal relating to The AES Corporation 2003 Long Term Compensation Plan, the New York Stock Exchange (“NYSE”) rules prescribe that the minimumadvisory vote on executive compensation, which will constitute Stockholder

approval must be approval by a majoritydeemed to be the plurality of the votes cast, provided that the total votes cast represent over fifty-percent (50%) in interest of all securities entitled to vote.cast. In tabulating the voting results for any particular proposal, abstentions have the same effect as votes against the matter.matter, except in the case of the (non-binding) advisory vote on the frequency of the advisory vote executive compensation, where an abstention will have no effect. If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may be treated as “broker non-votes.” Generally, broker non-votes occur when a broker is not permitted to vote on a particular matter without instructions from the beneficial owner and instructions have not been given. Brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on “non-routine” proposals, such as the election of Directors, (i) the proposal relating to The AES Corporation 2003 Long Term Compensation Plan, as amended (i)(non-binding) advisory vote on executive compensation and the proposal relating to(non-binding) advisory vote on the reapprovalfrequency of The AES Corporation Performance Incentive Plan, as amended,the advisory vote on executive compensation, although they may vote their clients’ shares on “routine” proposals such as the proposal seeking ratification of E&Y as the independent registered public accounting firm. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal.

WHAT CONSTITUTES A QUORUM?

For business to be conducted at the Annual Meeting, a quorum must be present or represented by Proxy. Under our Bylaws, the presence of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting will constitute a quorum. The number of outstanding shares of common stock entitled to vote at the Annual Meeting is determined as of the record date. Abstentions and broker non-votes arewill be counted in determining whether a quorum is present for the Annual Meeting. A copy of the Bylaws is available on our website (www.aes.com).

MAY A STOCKHOLDER CHANGE A VOTE?

Stockholders are entitled to revoke their proxies at any time before their shares are voted at the Annual Meeting. To revoke a Proxy, a Stockholder must file a written notice of revocation with the Company, deliver a duly executed Proxy bearing a later date than the original submitted Proxy, or attend the Annual Meeting and vote in person. Attendance at the Annual Meeting will not, by itself, revoke your Proxy. If you hold shares in street name, you must contact your broker, bank or other nominee to change your vote or obtain a Proxy to vote your shares if you wish to cast your vote in person at the meeting.

ARE VOTING RECORDS CONFIDENTIAL?

We require vote tabulators and the Inspector of the Election to execute agreements to maintain the confidentiality of voting records. Voting records will remain confidential, except as necessary to meet legal requirements and in other limited circumstances such as proxy contests.

HOW DOES THE COMPANY SOLICIT PROXIES?

The Company will solicit proxies by mail, telephone, or other means of communication. We will bear the cost of the solicitation of proxies. The Company has retained Computershare Trust Co., N.A. and Georgeson Inc. to assist in soliciting proxies from Stockholders and we will pay a fee estimated at $12,000, plus expenses, for such services. In addition, solicitation may be made by our Directors, Officers, and other employees. We reimburse brokerage firms, custodians, nominees, and fiduciaries in accordance with the rules of the Financial Industry Regulatory Authority for reasonable expenses incurred by them in forwarding materials to the beneficial owners of our common stock.

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PROPOSAL 1: ELECTION OF DIRECTORS

The Board has nominated the ten current directors (“Nominees”eleven Directors (the “Nominees”). The Nominees are identified and discussed in the paragraphs below for election at this year’s Annual Meeting to each serve a one-year term expiring at the Annual Meeting in 2011.2012.

Samuel W. Bodman, III, age 71,72, has been a Director of AES since April 2009, and serves on the Compensation Committee of the Board.Qualifications and Experience:Dr. Bodman brings substantial government, industry, director and executive experience to AES. Dr. Bodman served as the U.S. Secretary of Energy from February 2005 to January 2009, one of the most prominent leadership positions in the energy industry. Dr. Bodman also served as Deputy Secretary for the Departments of Treasury (February 2004 to February 2005) and Commerce (June 2001 to February 2004). In these government positions, Dr. Bodman was responsible for and developed substantial expertise in ensuring energy security, maintaining the safety, security and reliability of the nuclear weapons stockpile, cleaning up the environment from the legacy of the Cold War, developing innovations in science and technology, ensuring safety and soundness in the US international financial systems, and providing leadership to 245,000 people who were employed by those three departments. Prior to government service, Dr. Bodman developed considerable private sector management and board experience during his 14 years as Chairman of Cabot Corporation, a specialty chemicals and performance materials company currently operating 39 manufacturing facilities located in the US and 19 other countries, and Chief Operating Officer of Fidelity Investments of Boston.Education:Dr. Bodman received a BS in chemical engineering from Cornell University and ScD from Massachusetts Institute of Technology.

Directorships for the Past Five Years: Since 2009, Dr. Bodman has also been a member of the Boardsboards of Directorsdirectors of Hess Corporation, DuPont Corporation, and DuPont Corporation.Weatherford International, LTD., and privately-held company: Strategic Growth Banking (2010—present).

Paul Hanrahan, age 52,53, has been a Director of AES since June 2002 and serves as Chairman of the Finance and Investment Committee of the Board.Qualifications and Experience: Since joining the Company in 1986, Mr. Hanrahan has held various positions of increasing responsibility at AES. He has served as our President and Chief Executive Officer since June 2002. As the chief executive of AES, he provides our Board with in-depth knowledge about the Company’s business and the issues confronting our business. Prior to assuming his current position with the Company, Mr. Hanrahan served as the Chief Operating Officer and Executive Vice President of AES, during which time, he was responsible for managing all aspects of business development activities and the operation of multiple electric utilities and generation facilities in Europe, Asia and Latin America. In addition, Mr. Hanrahan was previously the President and Chief Executive Officer of AES China Generating Co. Ltd., a public company formerly listed on NASDAQ. Mr. Hanrahan has also managed other AES businesses in the United States, Europe and Asia. Prior to joining AES, Mr. Hanrahan served as a line officer on a fast attack nuclear submarine, USS Parche (SSN-683).Education: Mr. Hanrahan is a graduate of Harvard Business School and the U.S. Naval Academy.

Directorships for the Past Five Years: Since March 2006, Mr. Hanrahan has also been a member of the Boardboard of Directorsdirectors of Corn Products International, Inc.

Kristina M. Johnson,age 53, has been a Director of AES since January 2011, and currently serves on the Compensation Committee. Dr. Johnson previously served on the Board from April 2004 to April 2009.Qualifications and Experience:Dr. Johnson is the former Undersecretary for Energy at the Department of Energy (April 2009—November 2010) where she successfully brought greater cohesion to energy and environmental programs and also played a key role in ensuring that Recovery Act projects were of the highest caliber to have the greatest impact on the country. Prior to government service, Dr. Johnson was Provost and Senior Vice President for Academic Affairs at the Johns Hopkins University from September 2007 – April 2009. Previously, she served as the Chief Academic and Administrative Officer and Chief Budget Officer of the Edmund T. Pratt, Jr., School of Engineering at Duke (“Duke”) University, joining Duke in July 1999. Prior to joining Duke, Dr. Johnson served on the faculty of the University of Colorado at Boulder from 1985 – 1999 as a Professor of Electrical and Computer Engineering and a co-founder and director (1993-1997) of the National Science Foundation Engineering Research

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Center for Optoelectronic Computing Systems Center.Education: Dr. Johnson received her BS with distinction, MS and PhD from Stanford University in Electrical Engineering. She is an expert in liquid crystal electro-optics and has over forty-five patents or patents pending in this field.

Directorships for the Past Five Years: Since 2006, Dr. Johnson served on the boards of directors of Minerals Technologies, Inc., Boston Scientific Corporation and Nortel Networks, until her appointment to the Department of Energy when she resigned from all public boards. She was recently re-elected to the board of directors of Boston Scientific Corporation.

Tarun Khanna, age 43,44, has been a Director of AES since April 2009 and serves on the Nominating, Governance and Corporate Responsibility Committee of the Board.Qualifications and Experience:Dr. Khanna is the Jorge Paulo Lemann Professor at the Harvard Business School, joining the faculty in 1993. He brings substantial expertise regarding global business, emerging markets and corporate strategy to the Board. Dr. Khanna’s scholarly work has been published in a range of economics, management and foreign policy journals and he recently publishedBillions of Entrepreneurs: How China and India are Reshaping their Futures, and Yours, a book focusing on the drivers of entrepreneurship in China and India, which are important markets to AES’ business. A forthcomingHis new co-authored book,Winning in Emerging Markets: A Roadmap for Strategy and Execution, will bewas published in March 2010. He was appointed a Young Global Leader (under 40) by the World Economic Forum in 2007, and was elected as a Fellow of the Academy of International Business in 2009.2009, and was appointed Director of Harvard University’s South Asia Initiative in 2010.Education: Dr. Khanna received a BSE from Princeton University and PhD from Harvard University.

Directorships for the Past Five Years:Dr. Khanna is also a member of the Boardsboards of Directorsdirectors of SKS Microfinance (since February 2009), and the following privately-held companies: GVK Bio Sciences (since 2007), and TVS Logistics (since 2008).

John A. Koskinen, age 70,71, has been a Director of AES since April 2004 and serves on the Financial Audit Committee and Compensation Committee of the Board.Qualifications and Experience:Mr. Koskinen brings over thirty-five years of executive, board, government, experience, and financial management expertiseexperience to the Board. He has served as the Non-Executive Chairman of Freddie Mac since September 2008 and served as the interim CEO and the person performing the function of Principal Financial Officer of Freddie Mac for six months during 2009. Mr. Koskinen has managed a wide range of companies and divisions engaged in a variety of activities, including mortgage securitization and investment, real estate development and management, hotel and resort operations, home building and insurance. He has also held several senior executive positions in government. Mr. Koskinen was President and a member of the Board of the United States Soccer Foundation from 2004 to 2008. Previously, he served as Deputy Mayor and City Administrator for the District of Columbia from 2000 to 2003. Prior to his election as Deputy Mayor, Mr. Koskinen occupied several positions within the U.S. Government, including service from 1994 through 1997 as Deputy Director for Management of the Office of Management and Budget. From 1998 to 2000, he served as Assistant to the President (President Clinton) and chaired the President’s Council on Year 2000 Conversion. Prior to his service with the U.S. Government, in 1973, Mr. Koskinen joined the Palmieri Company, which specialized in turnaround management, as Vice President and later served as President and Chief Executive Officer from 1979 through 1993. Mr. Koskinen was also a member of the Board of Trustees of Duke University from 1985 to 1997, serving as Chairman of the Board from 1994 to 1997.Education: Mr. Koskinen graduated with a JD,cum laude, from Yale University School of Law and a BA,magna cum laude, in physics from Duke University where he was a member of Phi Beta Kappa.

Directorships for the Past Five Years:Since 2007, Mr. Koskinen has also been a member of the Boardboard of Directorsdirectors of American Capital Strategies.

Philip Lader, age 64,65, has been a Director of AES since April 2001 and serves as Chairman of the Nominating, Governance and Corporate Responsibility Committee and a member of the Finance and Investment Committee of the Board.Qualifications and Experience:Mr. Lader brings substantial executive, board and government experience to AES. The former U.S. Ambassador to the Court of St. James’s, he has served as Chairman of WPP plc, athe world’s largest global advertising and communicationsmarketing services company, comprised of approximately 125,000141,000 people in 107 countries, which includes J. Walter Thompson, Young & Rubicam, and Ogilvy & Mather since 2001. A lawyer, Mr. Lader is also a Senior Advisor to Morgan

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Stanley, and serves as a member of the Investment Committees of Morgan Stanley’s Global Real Estate and Infrastructure Funds.Funds and is Vice Chairman of RAND Corporation. Mr. Lader served as White House Deputy Chief of Staff, Assistant to the President, Deputy Director of the Office of Management and Budget, and Administrator of the U.S. Small Business Administration during the Clinton Administration. Mr. Lader was also President of Sea Pines Company, Executive Vice President of the U.S. holdings of the late Sir James Goldsmith, and president of several universities in South Carolina and Australia.Education: Mr. Lader graduated with a BA from Duke University where he was a member of Phi Beta Kappa, an MA from the University of Michigan, completed graduate law studies at Oxford University, and received a JD from Harvard Law School.

Directorships for the Past Five Years: Mr. Lader is alsoor has been a member of the Boardsboards of Directorsdirectors of WPP plc (2001-current), Lloyd’s of London (2005-current), RAND Corporation (2001-current)(2005-2010), Marathon Oil Corporation (2002-current), UC RUSAL (2006-curent), Songbird Estates, plc (2006-2009), British Museum (2001-2006), and the following privately-held or non-profit companies: Duck Creek Technologies (since 2009), RAND Corporation (2001-current), Atlantic Council of US (2008-current), Smithsonian Museum of American History (since 2006), Salzburg Global Seminar (since 2008), Duck Creek Technologies Europe (since 2009),Lader Foundation, and Bankinter Foundation for Innovation (since 2009), Songbird Estates, plc (2006-2009), British Museum (2001-2006), and the Atlantic Council (2008-current)2007).

Sandra O. Moose, age 68,69, has been a Director of AES since April 2004, and serves on the Nominating, Governance and Corporate Responsibility Committee and the Finance and Investment Committee of the Board.Qualifications andExperience: Dr. Moose brings substantial executive, strategic, planning, operations, consulting, and corporate governance experience to the Board. Dr. Moose is President of Strategic Advisory Services, and from 1975 to 2003 served as a Directordirector and Senior Vice President of The Boston Consulting Group (“BCG”). At BCG, Dr. Moose provided strategic planning,

operational effectiveness and related consulting services to global clients in a variety of industries, including consumer and industrial goods, financial services and telecommunications, for over 35 years. Dr. Moose managed BCG’s New York office from 1988-1998 and was chair of the East Coast region, which accounted for approximately 20% of BCG’s overall revenues, from 1994-1999. In addition to her strategic planning expertise, Dr. Moose has been the Chairchair or Presiding Directorpresiding director of several public companies and several charitable organizations, which has given her extensive expertise in corporate governance.Education: Dr. Moose received her PhD and MA in economics formfrom Harvard University and BA,summa cum laude, in economics from Wheaton College.

Directorships for the Past Five Years:Dr. Moose is also a member of the Boardsboards of Directorsdirectors of Verizon (since November 2005), serving as Presiding Directorits presiding director (2000-current), Chairpersonchairperson (since 2005) of the Boardboard of Trusteestrustees of Natixis Advisor Funds (1982-current) and Loomis Sayles Funds (2003-current), and the Alfred P. Sloan Foundation (2000-current). Dr. Moose also served on the Boardboard of directors of Rohm and Haas Company (1981-2009) and as its Lead Directorlead director from 1998.

John B. Morse, Jr., age 63,64, has been a Director of AES since December 2008 and serves on the Financial Audit Committee and Finance and Investment Committee of the Board.Qualifications and Experience:Mr. Morse brings substantial executive experience to the Board, including board, investment and other finance expertise. Before his retirement in December 2008, Mr. Morse served as the Senior Vice President, Finance and Chief Financial Officer of The Washington Post Company (the “Post”), a diversified education and media company whose principal operations include educational services, newspaper and magazine print and online publishing, television broadcasting and cable television systems recording over $4.4 billion in annual operating revenues. During Mr. Morse’s 17 year tenure, the Post’s leadership made more than 100 investments in both domestic and international companies and included new endeavors in emerging markets. Prior to joining the Post, Mr. Morse was a partner at Price Waterhouse (now PricewaterhouseCoopers), where he worked with publishing/media companies and multilateral lending institutions for more than 17 years.Education: Mr. Morse graduated with a BA from the University of Virginia and an MBA from the Wharton School of Finance at the University of Pennsylvania. Mr. Morse is a Certified Public Accountant.

Directorships for the Past Five Years: Mr. Morse is also a member of the Boardsboards of Directorsdirectors of Host Hotels & Resorts Corporation (2005-present), the Home Shopping Network (2008-present), Trustee and President Emeritus of the College Foundation of the University of Virginia (2006-present)(2002-present), and recently completed a six-year term as a member of the Financial Accounting Standards Advisory Council (2004-2010).

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Philip A. Odeen, age 74,75, has been a Director of AES since May 1, 2003 and has served as Chairman of the Board and Lead Independent Director since January 2008. Mr. Odeen also serves as Chairman of the Compensation Committee and a member of the Finance and Investment Committee of the Board.Qualifications and Experience:Mr. Odeen has provided leadership, strategic planning, executive compensation, and operations guidance to our Board as a result of his varied global business, governmental and non-profit and charitable organizational experience of over 40 years. As of December 31, 2007, Mr. Odeen assumed the Non-Executive Chairmanship for Convergys Corporation. From October 2006 to October 2007, Mr. Odeen served as Non-Executive Chairman for Avaya and served as Non-Executive Chairman for Reynolds and Reynolds Company from July 2004 until October 2006. Mr. Odeen retired as Chairman/CEO of TRW Inc. in December 2002. Prior to joining TRW in 1997, Mr. Odeen was President and Chief Executive Officer of BDM, which TRW acquired in 1997. From 1978 to 1992, Mr. Odeen was a Senior Consulting Partner with Coopers & Lybrand and served as Vice Chairman, management consulting services,Management Consulting Services, from 1991 to 1992. From 1972 to 1978, he was Vice President of the Wilson Sporting Goods Company. Mr. Odeen has served in senior positions with the Office of the Secretary of Defense and the National Security Council staff, and has served on the boards of community organizations, including the Northern Virginia Technology Council, Wolf Trap Foundation, Inova Health Care, CharityWorks, and Childhelp USA.Education: Mr. Odeen graduated with a BA from the University of South Dakota where he was a member of Phi Beta Kappa, was a Fulbright Scholar to the United Kingdom, and earned an MA from the University of Wisconsin.

Directorships for the Past Five Years:Mr. Odeen is also a member of the Boardsboards of Directorsdirectors of Convergys Corporation (2007-present), Qinetiq NA (2009-present)(2006-present), Booz, Allen, Hamilton (2008-present), Xstream Systems (2009-current), Northrop Grumman Corporation (2005-2007), Avaya (2005-2006), and Reynolds and Reynolds Company (2005-2006).

Charles O. Rossotti, age 69,70, has been a Director of AES since March 2003 and serves as Chairman of the Financial Audit Committee of the Board.Qualifications and Experience:Mr. Rossotti brings substantial executive, entrepreneurial, global business, operations, and finance experience to our Board as a result of his previous positions. He has servedserves as a Senior Advisor with the Carlyle Group, one of the world’s largest private equity firms. From November 1997 until November 2002, Mr. Rossotti was the Commissioner of Internal Revenue at the United States Internal Revenue Service (“IRS”), where he was responsible for regulatory and financial and accounting functions for $2 trillion a year in tax revenues. Prior to joining the IRS, Mr. Rossotti was a founder of American Management Systems, Inc. (“AMS”), a technology and management consulting firm which grew from inception to 9,000 employees and $800 million in revenue, where he oversaw operations in the U.S., Europe, and Asia. Mr. Rossotti held the position of President of AMS from 1970-1989, Chief Executive Officer from 1981 to 1993 and Chairman from 1989 to 1997, where he oversaw expansion into developed international markets, risk management of contracting functions, and strategic actions. From 1965 to 1969, he held various positions in the Office of Systems Analysis within the Office of the Secretary of Defense. He is currently a member of the Boardboard of Directorsdirectors of Capital Partners for Education, a non-profit organization and a member of the Controller General’s Advisory Board of the U.S. Government Accountability Office.Education: Mr. Rossotti graduatedmagna cum laude from Georgetown University and received an MBA with high distinction from Harvard Business School.

Directorships for the Past Five Years: Mr. Rossotti is also a member of the Boardsboards of Directorsdirectors of Bank of America (2008-present)Corporation (2009-present), Booz, Allen, Hamilton (2008-present), and Merrill Lynch Corporation (2004-2008) and the following privately held companies: Apollo Global (2008-present), Compusearch Systems, Inc. (2005-present), Merrill Lynch Corporation (2004-2007)(2005-2011), Adesso Systems Corporation (2005-2006), and Liquid Engines, Inc. (2004-2006), Quorum Management Solutions (2010-present), and Primatics Financial (2011-present).

Sven Sandstrom, age 68,69, has been a Director of AES since October 2002 and serves on the Financial Audit Committee and the Nominating, Governance and Corporate Responsibility Committee of the Board.Qualifications and Experience:Mr. Sandstrom brings substantial experience in global finance, strategy, operations, industry knowledge, as well as risk management to our Board as a result of his following positions. He is the former Managing Director of the World Bank where he served for 30 years, retiring in 2001. As Managing Director for ten years, Mr. Sandstrom was responsible for all aspects of the Bank’s work including financial policy and risk management, global strategy, and operations. Since 2001, Mr. Sandstrom has been a Directordirector and adviser at private corporations and public institutions in Europe, Africa, Asia and USA,the U.S., including

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the European Commission, the African Development Bank and the International Union for the Conservation of Nature (“IUCN”). He currently chairsFor six years, he chaired the international funding negotiations for the African Development Band and the Global Fund to Fight AIDS, TB and Malaria and serves as an adviser toMalaria. He is the CEO of Hand in Hand International, a UK public charitable trust foundedthat funds and supports development and microfinance operations in India.India, Afghanistan and Eastern and Southern Africa. He is also the sole owner and operator of a small hydropower plant in northern Sweden.Education: Mr. Sandstrom graduated with a BA from the University of Stockholm, an MBA from the Stockholm School of Economics, and a DrSc from the Royal Institute of Technology in Stockholm. For three years, he was a joint Research Associate at MIT and Harvard Business School.

Directorships for the Past Five Years: Mr. Sandstrom is also a member of the Boardboard of Directorsdirectors of Hand in Hand International, UK (2009-present) and IUCN, Switzerland (2004-2008).

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INFORMATION CONCERNING OUR BOARD OF DIRECTORS

Director Independence

We are required to have a majority of independent Directors serving on our Board and may only have independent Directors serving on each of our Financial Audit, Compensation and Nominating, Governance and Corporate Responsibility Committees pursuant to the rules of the NYSENew York Stock Exchange (the “NYSE”) and, with respect to our Financial Audit Committee, the rules and regulations existing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Our Board undertook an annual review of Director and Director Nominee independence in February 2010.2011. The purpose of this review was to determine whether any relationships or transactions involving Directors and Director nominees (including their family members and affiliatesaffiliates) were inconsistent with a determination that the Director or Director nominee is independent under the independence standards set forth in the NYSE rules and our Corporate Governance Guidelines and, with respect to Financial Audit Committee members and Financial Audit Committee nominees, under the independence standards for audit committee members adopted by the Securities and Exchange Commission (“SEC”).SEC.

In making this determination, the Board considersconsidered not only the criteria for independence set forth in the listing standards of the NYSE but also any other relevant facts and circumstances that may have come to the Board’s attention, after inquiry, relating to transactions, relationships or arrangements between a Director or a Director nominee or any member of their immediate family (or any entity of which a Director or Director nominee or an immediate family member is an Executive Officer, general partner or significant equity holder) on the one hand, and AES or any of its subsidiaries or affiliates, on the other hand, that might signal potential conflicts of interest, or that might bear on the materiality of a Director’s or a Director nominee’s relationship to AES or any of its subsidiaries. TheAs described in the preceding sentence, the Board considersconsidered the independence issue not merely from the standpoint of the Director or Director Nominee, but also from that of the persons or organizations with which the Director or Director Nominee is affiliated.

Based on its review, our Board determined that Messrs. Bodman, Khanna, Koskinen, Lader, Morse, Odeen, Rossotti and Sandstrom and Dr.Drs. Bodman, Khanna, Moose and Johnson each qualify as independent under the independence standards existing under the NYSE rules and that Kristina M. Johnson, who advised the Company on April 19, 2009 that she would not stand for re-election to the AES Board of Directors, was also independent.rules. Our Board also determined that Messrs. Koskinen, Morse, Rossotti and Sandstrom also qualify as “independent” under the independence standards for audit committee members adopted by the SEC.

Board Leadership Structure

Our Corporate Governance Guidelines require the separation of the offices of the Chairman of the Board (“Chairman”) and Chief Executive Officer (“CEO”). If the Chairman is independent, he or she will also serve as Lead Independent Director. Since 1993, we have separated the offices of Chairman and CEO. Since 2003, our Chairman has been an independent Director who has also acted as Lead Independent Director.

We believe the structure described above provides strong leadership for our Board, while also positioning our CEO as the leader of the Company for our investors, counterparties, employees and other stakeholders. Our current structure, which includes an independent Chairman serving as Lead Independent Director, helps ensure independent oversight over the Company. Our Corporate Governance Guidelines state that the Lead Independent Director’s duties include coordinating the activities of the Independentindependent Directors, coordinating the agenda for and moderating sessions of the Board’s Independentindependent Directors, and facilitating communications among the other members of the Board. At the same time, our current structure allows the CEO to focus his energies on management of the Company.

Our Board has nineten independent members and only one non-independent member, the CEO. A number of our independent Board members are currently serving or have served as Directorsdirectors or as members of senior management of other public companies. We have three Board Committees comprised solely of independent Directors, each with a different independent

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Director serving as Chairman of the Committee. We believe that the number of independent experienced Directors that make up our Board, along with the independent oversight of the Board by the non-executive Chairman, benefits our Company and our Stockholders.

Pursuant to our bylawsBylaws and our governance guidelines,Corporate Governance Guidelines, our Board determines the best leadership structure for the Company. As part of our annual Board self-evaluation process, the Board evaluates issues such as independence of the Board, communication between Directors and Management, the relationship between the CEO and Chairman, and other matters that may be relevant to our leadership structure. The Company recognizes that in the event that circumstances facing the Company change, a different leadership structure may be in the best interests of the Company and its Stockholders.

THE COMMITTEES OF THE BOARD

In 2009,2010, the Board maintained four standing Committees: the Compensation Committee, Finance and Investment Committee, Financial Audit Committee, and the Nominating, Governance and Corporate Responsibility Committee. The Board has determined that each of the members of the Compensation Committee, Financial Audit Committee, and Nominating, Governance and Corporate Responsibility Committee meets the standards of “independence” established by the NYSE. A description of each Board Committee is set forth below.

STANDING COMMITTEES:

Compensation Committee

The members of the Compensation Committee are Samuel W. Bodman, III, Kristina M. Johnson, John A. Koskinen, and Philip A. Odeen (Chairman). For information regarding the role of our Compensation Committee, including its processes and procedures for determining Executiveexecutive compensation, see “Information About our Compensation Committee” beginning on page 5358 of this Proxy Statement. The Compensation Committee operates under the Charter of the Compensation Committee, which has been adopted and approved by the Board. The Compensation Committee may form subcommittees and delegate to those subcommittees such power and authority as the Compensation Committee deems appropriate and in compliance with law. A copy of the Compensation Committee’s Charter can be obtained from the Company’s web site (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, VA 22203.

Finance and Investment Committee

The members of the Finance and Investment Committee are Paul Hanrahan (Chairman), Philip Lader, Sandra O. Moose, John B. Morse, Jr., and Philip A. Odeen. The Finance and Investment Committee focuses on the evaluation of strategic plans, potential investments, budgets, proposed equity and/or debt offerings, and is also available to provide advice and assistance to Company Management on a more frequent basis than the regularly scheduled meetings of the Board. The Finance and Investment Committee operates under the Charter of the Finance and Investment Committee adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the officeOffice of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203.

Financial Audit Committee (the “Audit Committee”)

The members of the Audit Committee are John A. Koskinen, John B. Morse, Jr., Charles O. Rossotti (Chairman), and Sven Sandstrom. The Audit Committee is responsible for the review and oversight of the Company’s performance with respect to its financial responsibilities and the integrity of the Company’s accounting and reporting practices. The Audit Committee may delegate its authority to subcommittees when it deems such delegation to be appropriate and in the best interests of the Company. The Audit Committee, on behalf of the Board, also appoints the Company’s independent auditors, subject to Stockholder ratification, at the Annual Meeting. The Audit Committee operates under the Charter of the Audit Committee

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adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the officeOffice of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Our Board has determined that all members of the Audit Committee are independent within the meaning of the SEC rules and under the current listing standards of the NYSE. The Board has also determined that each member of the Audit Committee is “financially literate” as required by the NYSE rules and an Audit Committee Financial Expert within the meaning of the SEC rules based on, among other things, the experience of such member, as described under “Proposal 1: Election of Directors” set forth on page 5 of this Proxy Statement.

Nominating, Governance and Corporate Responsibility Committee (the “Nominating Committee”)

The members of the Nominating Committee are Tarun Khanna, Philip Lader (Chairman), Sandra O. Moose and Sven Sandstrom. The Nominating Committee provides recommendations for potential Director nominees for election to the Board,

establishes compensation for Directors, considers governance and social responsibility issues relating to the Board and the Company and considers the scope of the Company’s internal environmental and safety audit programs. The Nominating Committee may form subcommittees and delegate to those subcommittees such power and authority as the Committee deems appropriate and in compliance with law. The Nominating Committee operates under the Charter of the Nominating Committee adopted and approved by the Board. A copy of the Charter can be obtained from the Company’s website (www.aes.com) or by sending a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203.

Director Qualifications. Director nominees are selected on the basis of, among other things, experience, knowledge, skills, expertise, integrity, ability to make independent analytical inquiries, understanding the Company’s global business environment and willingness to devote adequate time and effort to Board responsibilities so as to enhance the Board’s ability to oversee and direct the affairs and business of the Company.

DiversityDiversity.. The Company does not maintain a separate policy regarding the diversity of the Board. However, the charter of the Nominating Committee requires that the Committee review the composition of the Board to ensure it has the “appropriate balance” of attributes such as knowledge, experience, diversity and other attributes. In addition, the Company’s Corporate Governance Guidelines establish that the size of the Board shall be nine to twelve members, a range which “permits diversity of experience without hindering effective discussion or diminishing individual accountability.”

Consistent with these governing documents, both the Nominating Committee and the full Board seek Director nominees with distinct professional backgrounds, experience and perspectives so that the Board as a whole has the range of skills and viewpoints necessary to fulfill its responsibilities. As part of our annual Board self-evaluation process, the Board evaluates whether or not the Board as a whole has the skills and backgrounds for the current issues facing the Company. The Board also evaluates its effectiveness with regard to specific areas of expertise.

Director Nomination Process. Pursuant to our Corporate Governance Guidelines, our Nominating Committee reviews the qualifications of proposed Director Nomineesnominees to serve on our Board and recommends Director Nomineesnominees to our Board for election at the Company’s Annual Meeting. The Board proposes a slate of Director Nomineesnominees to the Stockholders for election to the Board, using information provided to the Committee.

In certain instances, a third party may assist in identifying potential Director Nominees.nominees. The Nominating Committee also considers potential nominations for Director provided by Stockholders and submits any such suggested nominations, when appropriate, to the Board for approval. Stockholder nominees for Director are evaluated using the criteria described above. Stockholders wishing to recommend persons for consideration by the Committee as nominees for election to the Board can do so by writing to the Office of the Corporate Secretary of the Company at 4300 Wilson Boulevard, Arlington, Virginia 22203 and providing the information and following the additional procedures set forth in the Company’s Amended and Restated Bylaws, which are more fully described in “Stockholder Proposals and Nominations for Director” set forth on page 8073 of this Proxy Statement.

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Director Compensation. The Nominating Committee periodically reviews the level and form of compensation paid to Directors, including theour Director compensation program’s underlying principles. Under the Corporate Governance Guidelines, a Director who is also an Officer of AES is not permitted to receive additional compensation for service as a Director. In reviewing and determining the compensation paid to Directors, the Committee considers how such compensation relates and compares to that of companies of comparable size which operate in a comparable industry and/or have equivalent complexity. The Committee’s review includes looking at both direct and indirect forms of compensation paid to our Directors, including any charitable contributions made by the Company, on behalf of such Directors, to organizations with which Directors are affiliated. The General Counsel assists the Nominating Committee with its review of our Director compensation program. The General Counsel’s office conducts research on other companies’ Directordirector compensation practices by reviewing broad-based Directordirector compensation studies, includingwhich generally include a hundred or more companies, and providesproviding the Committee with a

benchmarking analysis of such companiescompanies’ practices againstas compared to the Company’s Director compensation program. TheThese reports are further described in “Director Compensation”Compensation for 2010” below. Neither the General Counsel nor the Nominating Committee retain an independent compensation consultant to assist with recommending or determining Director compensation. Any proposed changes to the Director compensation program are recommended by the Nominating Committee to the Board for consideration and approval. For further information regarding our Director compensation program, see “Compensation“Compensation of Directors”Directors (2010)” starting on page 5559 of this Proxy Statement.

BOARD’S ROLE IN RISK MANAGEMENT

Our Management is responsible for the management and assessment of risk at the Company, including communication of the most material risks to the Board and its Committees, who provide oversight over the risk management practices implemented by Management. Our full Board provides oversight forwith respect to risk management, except for the oversight of risks that have been specifically delegated to a Committee of the Board. Even when the oversight of a specific area of risk has been delegated to a Committee, the full Board may maintain oversight over such risks through the receipt of reports from the Committee Chairpersons to the full Board at each regularly-scheduled full Board meeting. In addition, if a particular risk is material or where otherwise appropriate, the full Board may assume oversight over a particular risk, even if the risk was initially overseen by a Board Committee. The Board and Committee reviews occur principally through the receipt of regular reports from Management to the Board on these areas of risk, and discussions with Management regarding risk assessment and risk management.

Full Board. At its regularly scheduled meetings, the Board generally receives a number of reports which include information relating to risks faced by the Company. The Company’s Chief Financial Officer and/or Treasurer provides a report on the Company’s liquidity position, including an analysis of prospective sources and uses of funds, and the implications to the Company’s debt covenants and credit rating, if any. The Chief Operating Officer or his designee provides an operational report, which includes risks related to tariffs, efficiency at our subsidiaries’ plants, construction, and related matters. The Company’s Vice President of Global Risk and Commodities provides a report to the Board which explains the Company’s primary risk exposures, including currency, commodity and interest rate risk. Finally, the Company’s General Counsel provides a privileged dispute resolution report which provides information regarding the status of the Company’s litigation and related matters. At each regularly-scheduled Board meeting, the full Board also receives reports from Committee Chairpersons, which may include a discussion of risks initially overseen by the Committees for discussion and input from the full Board. As noted above, in addition to these regular reports, the Board receives reports on specific areas of risk from time to time, such as regulatory, geopolitical, cyclical or other risks that are not covered in the regular reports given to the Board and described above.

Committees. The Audit Committee maintains initial oversight over risks related to the integrity of the Company’s financial statements; internal controls over financial reporting and disclosure controls and procedures (including the performance of the Company’s internal audit function); the performance of the independent auditor; and the effectiveness of the Company’s Ethics and Compliance Program. The Company’s Nominating Committee maintains initial oversight forover risks related to workplace safety, and our subsidiaries’ continuing efforts to ensure compliance with the best practices in this area. When appropriate, the Nominating Committee also receives environmental reports regarding our subsidiaries’ compliance with

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environmental laws and their efforts to ensure continuing compliance with governing laws and regulations. The Company’s Compensation Committee maintains initial oversight forover risks related to the Company’s compensation practices, including practices related to hiring and retention, succession planning (approved by the full Board), and training of employees. The Finance and Investment Committee maintains initial oversight forover risks related to business development, including business combinations, Greenfield development and re-financings. Generally, any such transactions are also reviewed and, in many cases, approved by the full Board.

DIRECTOR ATTENDANCE

In 2009,2010, our Board convened twelveeleven times, including fivefour telephonic meetings, and our Board Committees held the following number of meetings: (i) Audit Committee—nine meetings; (ii) Compensation Committee—eight meetings; (iii) Finance and Investment Committee—threeseven meetings; and (iv) Nominating Committee—five meetings.

Under our Corporate Governance Guidelines, Directors are expected to attend Board meetings and meetings of Committees on which they serve in person or by conference telephone, and Directors are also encouraged to attend the Annual Meeting. Messrs. Bodman, Khanna, Koskinen, Hanrahan, Lader, Morse, Odeen, Rossotti, and Sandstrom and Dr. Moose attended the 20092010 Annual Meeting of Stockholders on April 23, 2009.22, 2010. All of our current Directors attended at least 85%91% of the aggregate of all meetings of the Board and the Committees on which they serve,served, during the period in which each Director served.

In accordance with the Company’s Corporate Governance Guidelines, non-management Directors met in executive session after each in-person meeting of the Board. Non-management Directors met seven times in 2009,2010, with Mr. Odeen presiding as Lead Independent Director.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

20092010 Performance At-A-Glance

In 2009, AES delivered exceptionally strong performanceAES’ financial and operational results in a year that was generally characterized by2010 exceeded expectations particularly when considered against the globalbackground of the challenging economic crisis and uncertaintyenvironment in which they were accomplished. These results were achieved through improvements in the financial markets. Theunderlying performance of our operating businesses, management of our cost structure, prioritization of capital allocation and improvement of our debt profile. In addition, during 2010 the Company achieved the following: (1) generated an all-time record $1.25 billionmade significant progress in distributions fromexpanding and growing its global platform by bringing a total of 777 MW of new construction on-line, acquiring core power assets, and expanding our subsidiaries, a significant achievement in the context of the macroeconomic environment; (2) achieved its key operational metricsdevelopment pipeline across both core power and achieved significant cost savings across the organization; (3) prioritized investments relating to future growth opportunities; (4) improved the debt profile of the Company; and (5) closed $2.5 billion in new financings.renewable energy business lines. Our compensation awards in 2009 primarily recognizeare made based on the achievement of the challenging targets that were set for the year. It is also important to note, that while our people2010 performance was very strong, our stock price over the past three-year period has been below the average of the S&P 500. As a result, our compensation awards that align with AES’ stock price performance over a period of time have not paid out for their roles in delivering on commitments that created value for our Stockholders, in strengthening our position in the global power industry, and in creating and maintaining focused growth options that will allow the Company to continue to make value accretive investments in the comingpast three years.

Compensation Discussion and Analysis Overview

Our Compensation Discussion and Analysis (“CD&A”) is divided into fivesix sections:

This CD&A includes compensation details for our Chief Executive Officer (“CEO”), Mr. Paul Hanrahan, and our Chief Financial Officer (“CFO”), Ms. Victoria Harker and our next three most highly compensated Named Executive Officers, Mr. Andres Gluski, Mr. Brian Miller and Mr. Edward Hall.Andrew Vesey collectively, the “Named Executive Officers” or (“NEOs”).

Our Executive Compensation Philosophy and Process

IncludedOur compensation program is designed to achieve the following objectives:

Our Philosophycompensation program includes a substantial portion of variable compensation that is awarded in the form of equity and is performance based. We believe this structure motivates our Executives to act in the best interests of the Company’s Stockholders. The long-term incentive components granted in 2006, 2007 and 2008 that tie to Stockholder value creation and stock price performance currently have no value or have been forfeited in their entirety. These components represent 50% of the total long-term compensation value for each of those years. The value of these awards is reflected in the chart below:

Total NEO Equity Based Compensation for Grant Years 2006 through 2008

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Our compensation program is designed to allocate a significant portion of each NEOs total compensation to the achievement of both short- and long-term Company goals. Payouts are dependent on the achievement of financial, operational and strategic goals and the performance of our stock price. As the chart below shows, on average, more than 79% of the targeted total compensation for our NEOs is made up of at-risk incentive pay opportunities. The targeted total compensation referenced below includes 2010 base pay and 2010 target bonus and Long Term Compensation opportunity.

Our compensation program is linked to the achievement of the Company’s overall performance and the achievement of specific objectives in the short-, medium- and long-term. As such, incentive awards are dependent on performance and to the extent that the Company does not achieve or meet its objectives, incentive payouts will be reduced or eliminated.

Our compensation program includes the common elements of a base salary, a short-term incentive plan based upon the achievement of annual targets, a long-term compensation plan and retirement and other benefits that are designed to provide competitive total compensation. We maintain total compensation that is market competitive to enable us to attract, motivate and retain an experienced and qualified management team.

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Summary of Compensation Actions for 2010 and Changes Implemented in 2011

The following information highlights the Compensation Committee’s key compensation decisions in 2010. These decisions were made with the advice of the Compensation Committee’s independent consultant, Meridian Compensation Partners, LLC (“Meridian”) and are discussed in greater detail in this CD&A. The key compensation decisions made in 2010 were as follows:

2010 Actions

2011 Changes

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Our Executive Compensation Process

This section includes a discussion of the following:

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Our PhilosophyHighlights of our Executive Compensation Program

Our Executive Compensation Program (“Program”)compensation philosophy is designed to achievealign each of our Executive’s compensation with the following objectives:Company’s short- and long-term performance, and to provide executive compensation and incentives that will attract, motivate and retain high performing Executives. Consistent with this philosophy, a significant portion of the total compensation opportunity available to each of our Executives is directly related to our stock price performance and to other performance factors that measure our progress against our strategic growth and operating goals. Key features of our program that supports our compensation philosophy and help to align our Executives’ with our Stockholders’ interests include:

Our Program is designed to allocate a significant portion of each Named Executive Officer and senior leader’s total compensationconsultant who does not provide any other services to the achievement of both short- and long-term Company goals. More than 75% of the targeted total compensation for our Named Executive Officers is made up of at-risk incentive pay opportunities, the payouts of which are dependent on the achievement of financial, operational and strategic goals, and the performance of our share price. We believe the mix of compensation elements that we have in place for our Named Executive Officers and senior leaders provide the appropriate balance of incentives to encourage (1) the achievement of near-term performance objectives and (2) continued focus on medium- and longer-term goals that drive Stockholder value.Company.

Risk Assessment

We believe that the general design of AES’ compensation program promotes stability and growth (1) in the short-term through the payment of an annual incentive award with pre-set targets; (2) in the medium-term through awards which are measured in three-year periods and based on cash generation; and (3) in the long-term, through the payment of equity awards. As a result, we believe that our compensation elements and the multi-year vesting structure of our equity awards properly account for the time horizon of unnecessary risk and discourages risk-taking that could reduce Stockholder value.

Composition of Our NEOs’ Compensation Opportunities

To ensure our Program rewards strong performance, a significant portion of our total compensation opportunities are at-risk and performance contingent. Our Chief Executive Officer’sCEO’s compensation is higher than the compensation paid to our other Named Executive OfficersNEOs largely due to the scope of the rolehis position and his overall responsibility for the Company’s strategy and direction, andas well as his overall influence on AES’ near- and long-term performance.performance generally. Also, for these reasons, the Chief Executive Officer’sas shown previously, our CEO’s total direct compensation is more heavily weighted towards incentive compensation elements as compared to that of the other Named Executive Officers. The differences in relative pay between the Chief Executive Officer and the other Named Executive Officers reflect the varying levels of the individual’s responsibilities and are based to some extent on Survey Data for their specific positions.

The graphs below show the mix of the compensation elements paid to our Chief Executive Officer and other Named Executive Officers.

NEOs.

Our Process for Determining Executive Compensation

The Role of Our Compensation Committee

The Compensation Committee (“Committee”) has primary responsibility for oversight of the Company’s compensation and employee benefit plans and practices including its executive compensation Program which coverscover our Named Executive Officers.NEOs. On an annual basis, the Compensation Committee also reviews the Company’s succession plan for the Named Executive OfficersNEOs and other key positions.

As in prior years, in the first quarter of 2009,2010, the Compensation Committee reviewed and benchmarked AES’ Programexecutive compensation program against relevant Survey Data whichsurvey data that includes general industry and energy servicesindustry companies. SuchThis data

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was used to help determine payout opportunities for the coming year. In addition, as a reference, proxyExecutive compensation data disclosed data for the same or similar positions within Peer Energy Companies (“Peer Groups”)in proxies filed by other comparable companies in our industry is also provided to the Committee.Compensation Committee for reference.

Executive performance and Company performance affectsaffect both pay opportunities and short-term incentive payouts. To assess Company performance, the Compensation Committee receives a detailed summary of the Company’s overall performance against its pre-set targets for the year. To assess the performance of our Named Executive Officer, the Chief Executive Officer also provides a self-assessment against his stated goals and objectives for the year as well as his assessment on the performance of the Named Executive Officers against their stated goals for the year.

Management’s role in the compensation process is detailed in the section covering the role of our Management.

The Compensation Committee considers the information it receives and exercises its own independent judgment in making executive compensation recommendations to our Board. Each Named Executive Officer’s final compensation determination isBoard of Directors. The Compensation Committee’s recommendations are based on a review of: (1) Survey Data;survey data; (2) the individual’s performance against their pre-set goals and objectives for the year; (3) the individual’s experience; (4) the individual’s position and scope of responsibilities; and (5) the individual’s future prospects with the Company.

The Role of the Compensation Committee’s Independent Consultant

Since 2008,In 2010, the Committee has retained the services of its own independent consultant. In 2009, it retained Hewitt Associates (“Hewitt”). Theconsultant providing the Committee believes that having its own consultant provides them with the opportunity to leverage the consultant’s impartial knowledge and experience related to executive compensation. During January 2010, Hewitt Associates employed the consultant. On February 1, 2010, the consultant joined Meridian. Throughout the year, the consultant reported directly and exclusively to the Committee and provided objective input and analysis to the Committee throughout the year with reference to market data trends, regulatory initiatives,

governance best practices and emerging governance norms. Hewitt’sThe consultant’s services did not includeincluded providing advice on determining the actual compensation amounts for executives.to be paid to the NEOs. During 2009, Hewitt’s2010, the consultants participated in eight Compensation Committee meetings either in person or by telephone.

During 2009,2010, neither Hewitt nor Meridian provided no consulting or other services to AES. In early 2010, Hewitt spun off a part of itsAES other than executive compensation practice into a separate, entirely independent entity namedservices.

The Role of Management’s Consultant

AES Management retained the services of Towers Watson in 2010 to provide benchmark data and “tally sheets” for the NEOs. All materials provided by Towers Watson were shared with Meridian Compensation Partners, LLC. Dueprior to being presented to the importance of its independent opinion,Compensation Committee. Meridian provided review and comment to maintain consistent process and representation, the Compensation Committee has retained Meridian going forward as its independent executive compensation consultant.appropriate.

The Role of Our Management

Our Chief Executive OfficerCEO participates in all Compensation Committee meetings, excluding any of the executive sessions.sessions or sessions of the Committee in which his compensation is discussed and approved. His role in the process forof determining executive compensation is to provide the Compensation Committee with an assessment of each Named Executive Officer’sNEOs performance against his/her pre-set targets,goals and objectives, and to provide his initial assessment and compensation recommendations for the individual’s incentive compensation and base salary.

Our Vice President of Human Resources develops written background and supporting materials for review by the Compensation Committee prior to thetheir meetings and presents information relating to specific elements of our Program.compensation program. If warranted, she also proposes changes to our annual and long-term incentive programs. In addition, she attends all Compensation Committee meetings, but is not present at the executive sessions.

The Human Resources team also directly interfaces with HewittMeridian to prepare the necessary background information for the Compensation Committee.

The Role of Management’s Consultant

AES Management retained the services of Towers Perrin (now “Towers Watson”) during 2009 to provide benchmark data and “tally sheets” for the Named Executive Officers. All materials provided by Towers Watson were shared with Hewitt prior to being presented to the Committee. Hewitt provided review and comment to the Committee as appropriate.

How we use Survey Data in our Compensation Process

During 2009,2010, Towers Watson supplied benchmarking data for each Named Executive OfficerNEO against a group of similarly-sizedsimilarly sized general industry and energy industry companies and similarly positioned Executives. This data was derived from the Towers Watson US

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General Industry Executive Compensation Database and Towers Watson US Energy Services Executive Compensation Databases (“2010 Survey Data”). HewittMeridian reviewed the benchmarking data and concluded that the data sources selected by AES were appropriate for these purposes.

The 20092010 Survey Data utilized either a blend of general industry and energy servicesindustry data or general industry data.data only. The data used variesvaried based on the Named Executive Officer’sNEOs role and the types of companies in which we may compete for talent. For the Chief Executive Officer,CEO, Chief Operating Officer (“COO”) and Executive Vice President, Regional President positions,position (“EVP, RP”), the 2010 Survey Data represents a blend of general industry and energy services data as it is more representative ofindustry data. Given the specific experience required for these positions and the operational nature of the individual’s role.each of these positions, we believe that this data provides a relevant benchmark comparator for us to evaluate these NEOs against. For the Chief Financial OfficerCFO and General Counsel and Corporate Secretary (“GC”) positions, the 2010 Survey Data represents the general industry data only. We use general industry data for these roles as it is more reflective of the experience required and the functional nature of the individual’s position.

The 2010 Survey Data is generally regressed (size-adjusted) based on our revenue sizes at the corporate or business unit level, as described below.

To understand the full range of pay within our relative market, Management includes Survey Datasurvey data that provides a market comparison at a range of the 25^th, 50^th and 75^th percentiles for each position. The Compensation Committee determines total compensation for our Named Executive OfficersNEOs after taking into account a range of factors, including rolejob complexity, level of experience and expertise, individual performance and long-term potential. Our Named Executive Officers’NEOs total compensation, including their target incentive opportunities, fallfalls within the range of the survey data.2010 Survey Data. For 2010, total target compensation fell within the following range of the market expressed in percentiles:

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As a secondary data source, the Compensation Committee is provided proxy data from 13 other energy companies selected based on 13 select energy Peer Group companies chosen for their similar sizescomparable size to AES.AES (the “Peer Group”). The Peer Group data is provided primarily as a compensation reference for individuals specifically in the energy industry. The Peer Group is reviewed on an annual basis and includesin 2010 was composed of the companies listed below.below:

While these companies have similarities to AES from an industry perspective, the Compensation Committee believes that the global nature of AES’ operations set it apart from these energy Peers,the Peer Group companies, whose operations are primarily domestic. Therefore, the Survey Data since it is comprised of(which includes data from general industry and energy services companies,industry companies) provides the Compensation Committee with a more complete view of similarly-sized companies with international operations against whom we compete for talent.

Components of AES’ Total Compensation Program

IncludedThis section includes a discussion of the following:

Overview of Our Compensation Elements

The following table lists each of the elements that comprise our Programcompensation program, the objectives behind each of these elements and its associated purpose.the key features of each of these elements.

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Pay Element			Compensation Objective			Key Features
Long-Term Compensation (“LTC”) Plan		Provide performance-based awards that align the interests of executivesour Executives with those of our Stockholders through equity and cash compensation tied to stock price performance and long term value creation.   Attract and retain key individuals critical to the success of the business by providing competitive LTC opportunities that vest over a three-year period.		Broad-based long-term incentive program. The programLTC Plan provides a mix of cash- and equity-based awards which link the individual’s contributions to long-term value creation through our Company and stock’s performance.awards.   Grants to Named Executive OfficersNEOs under the LTC Plan are based on a percentage of the individual’s salary and in 2010 were awarded in the form of:   •    Performance Units;PUs, PSUs; and SOs   •    Performance Stock Units;Beginning in 2011, AES will no longer grant cash-based PUs to our NEOs and other Officers. Going forward, all LTC Awards for NEOs and Officers will be in the form of equity.   •    Non-qualified Stock Options. For moreAdditional information onregarding our LTC Plan please see the discussionis detailed below.

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A Detailed Explanation of Our Long Term Compensation Plan (“LTC PlanPlan”) for 2010

As each element of the LTC Plan has unique features and measurement requirements, additional details pertaining to each component are provided below. TheFor 2010, the LTC Plan includesincluded a mix of Performance Units, Performance Stock UnitsPUs, PSUs and Stock Options.SOs. The overall LTC award opportunity of the award allocated(allocated in cash and equity isequity) was based on (1) the Company’s review of market practice and (2) an equally balanced division of net cash generated and share price appreciation. For a description of the 20092010 LTC Plan awards, see “2010 Long Term Compensation Plan awards, see “2009 Long Term Compensation Grants.”Grants” on page 32.

Overview of the LTC Components for Officers for 2010

Performance Units

Performance UnitsPUs are performance-based awards that directly link compensation to the collective performance of our businesses over a three-year period in relation toterms of the net cash produced. Performance UnitsPUs use a cash generation metric (“Cash-Value Added” or “CVA”)(CVA), a significant source of Stockholder value creation, to measure the net cash we produce by increasing revenue, reducing costs and improving productivity. Specifically, the CVA calculation is defined as Operating Income plus Business Development and Depreciation and Amortization; plus or minus Unrealized Commodity Derivatives gains/losses, and Equity in Earnings; plus Intercompany Management Fees to equal Cash EBITDA. Then Tax Charge is subtracted to equal After Tax Cash EBITDA and Cumulative Mandatory Capex Charge is subtracted to equal Total CVA. As a final step in the calculation the Total CVA is multiplied by AES’ Ownership percentage.

The targeted CVA for the specific three-year performance period is determined at the time the Performance Units award isPU awards are granted. Pre-defined, objective adjustments may beare made to the CVA target during the three-year performance period, based on changes to the Company’s portfolio, such as an asset divestiture or sale of a portion of equity in a subsidiary. At the end of each year, an outside financial consultant is engaged to assist in reviewing our final CVA calculation.calculation and ensure it meets our evaluation criteria.

As Performance Units

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PUs are performance-based, theperformance-based. The payment made, if any, for each Performance UnitPU depends upon the level of CVA achieved over the three-year measurement period. If the required level of CVA is achieved, awards are paid in the calendar year immediately following the date the performance period ends. The following table illustrates the payout percentage at each CVA level for CVA targets set for the 2009-20112010-2012 performance period:

Value Of Performance Units Based On 2010 Cash Value Added Target

Between the CVA levels listed in the table above, a straight-line interpolation is used to determine the payout percentage for each unit. The maximum value of a single Performance UnitPU is $2.00.

Performance Stock Units

A Performance Stock UnitPSU represents the right to receive a single share of AES common stock or cash of equivalent fair market value subject to certain vesting conditions and the performance of AES common stock measured against the S&P 500, as further discussed below.

Performance Stock UnitsPSUs directly align our Named Executive Officers’NEOs compensation with our Stockholders’ interests since vesting of the awardsability to earn an PSU award is linked directly to stock price performance over a period of time. As stated above, the Compensation Committee retains the right to deliver Performance Stock UnitsPSUs in the form of AES common stock or theits cash equivalent.equivalent for 2010 grants. The Compensation Committee makes this determination on an annual basis prior to the deliverypayout of vested awards. ThereFor PSUs awarded in 2010 and prior years there is a two-year holding period (delayed payment), regardless of employment status, for Performance Stock Units after the award vests.awards have vested.

The Performance Stock Unit vesting methodologyability to earn a PSU award is subject to (1) a market condition which is based on the Total Stockholder Return (“TSR”)TSR of AES, as measured by the appreciation in stock price and dividends paid as well asand (2) the continued employment of the Named Executive Officer.NEO. Since 2007, and in-line with market practice we have defined TSR performance as AES’ three-year cumulative TSR relative to the three-year cumulative TSR of the S&P 500 companies using a 90-day moving average for the beginning and ending stock prices. BetweenThis definition is in line with market practice.

We have set the following vesting criteria for 2010 between the percentiles Performance Stock Unitlisted below. PSU vesting is interpolated on a straight-line basis.

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Stock Options

A Stock OptionSO represents an individual’s right to purchase shares of AES common stock at a fixed exercise price after the Stock OptionSO vests.

Stock OptionsSOs align our Named Executive Officers’NEOs’ interests with those of our Stockholders through equity ownership and also support our goal to encourage the retention of key individuals. A Stock OptionSO only has value to the holder if our stock price exceeds the exercise price of the Stock OptionSO after it vests. Stock OptionsSOs vest in equal installments over a three-year period commencing on the first anniversary of the date that the Stock OptionSO award is granted, provided that the Named Executive OfficerNEO continues to be employed by AES on such date.

It is our policy to grant Stock OptionsSOs to our Named Executive OfficersNEOs at an exercise price equal to the fair market value of our common stock (e.g., the closing price) on the grant date.

Restricted Stock Units

To address special retention and recognition issues on a limited basis, the Compensation Committee may approve special Restricted Stock UnitsRSU grants for our Named Executive Officers. These are not part of the regular LTC components for officers. We have not granted this type of award to our Named Executive Officers since 2007.NEOs. No special RSU awards were made in 2010. The details of these prior RSU awards are referencedincluded in the Summary Compensation Table, Outstanding Equity Awards at Fiscal Year End and Options Exercises and Stock Vested and Non-qualified Deferred Compensation tables on pages 33, 3845, 46 and 4047 of this Proxy Statement, respectively.

20092010 Compensation: Our Approach and Decisions

IncludedThis section includes a discussion of the following:

New for 2009

As part of our annual compensation process, we review current market practices and the competitiveness of our Program. As a result of this review, we implemented the following changes to our Program:

20092010 Base Salary Changes

With uncertainAs explained in the section titled “Our Process for Determining Compensation,” the Compensation Committee reviews market conditionsdata and peer industry data on an annual basis to understand prevailing market trends as compared to the resulting slow downcomposition of our Executives’ compensation. Our Executives’ base pay tends to lag behind the market average because a significant portion of their total compensation is performance-based and at-risk. Due to the fact that for several years we have generally awarded lower than market level base pay increases, a significant gap has arisen in economic growth atsome cases between our NEOs base pay and that of the beginningmarket. Upon review of 2009, Managementthe Survey Data, the Compensation Committee made a recommendationdetermination to awardaddress the discrepancy by awarding base pay increases at levels that were generally lowerhigher than the increases that would have otherwise been consideredmarket average in 2010. On average, the base pay increase in 2010 for 2009.our NEOs was 9%. The base salary paid to each Named Executive OfficerNEO is stated in the “Salary” column of the Summary Compensation Table, on page 3338 of this Proxy Statement. Base salaries continue to remain within the range of the 50^th percentile of the market.

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2009 Annual2010 Performance Incentive Plan Annual Payouts

20092010 Performance Targets

To setSubject to the terms and limits of the Performance Incentive Plan, each of the NEOs had an opportunity to earn a 2010 Performance Incentive Plan award if AES attained positive EBITDA. If positive EBITDA was obtained for 2010, each NEO would be eligible to receive a maximum payout capped at 0.150% of EBITDA with respect to the CEO, and 0.060% of EBITDA with respect to the other NEOs. The actual amount of the payout is determined based on results measured against the pre-set targets described below.

The final payout amounts were determined by the Compensation Committee, subject to its discretionary authority to reduce the award, based on the Company’s achievement of certain additional pre-set performance targets for 2009,measures. In setting these additional performance measures, the Compensation Committee considered information provided by Management about the Company’s strategy, long-term forecast, financial budget for the year and targeted operational improvements. The 2009As described more fully below, the additional performance measures considered under the Performance Incentive Plan measuredfor 2010 included safety, cash flow, performance improvement and corporate performance as described below.performance. The Compensation Committee approved targets across all metrics that were considered to be aggressive and highly challenging in the current economic environment. All metrics requiredwith some requiring a significant year over yearyear-over-year improvement.

The 2009 Performance Incentive Plan performance goals are detailed in the following chart.

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•    Subsidiary Distributions ($1,100-$1,3001,100 - $1,200 million) –    Subsidiary Distributions should not be construed as an alternative to Net Cash Provided by Operating Activities, which is determined in accordance with GAAP. –    Distributions are important to AES because AES is a holding company that does not derive any significant direct revenues from its own activities, but instead relies on its subsidiaries’ business activities and the resultant distributions to fund its debt service, investment and other cash needs. –    The reconciliation of the difference between Subsidiary Distributions and Net Cash provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons, which are both discretionary and non-discretionary in nature. These factors include, but are not limited to retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches AES and related holding companies.

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The Committee approves a Section 162(m) formula relative to the Performance Incentive Plan payouts on an annual basis for tax purposes. This formula provides a maximum payout under the Plan limited to 0.150% of adjusted EBITDA (as further described and reconciled below) for the CEO and 0.050% for the other Named Executive Officers. The Committee may apply negative discretion in determining any final payouts after considering individual and corporate performance which is detailed below.

The Company’s 20092010 Performance

In February 2011, the Compensation Committee determined that the Company had achieved positive EBITDA. The Compensation Committee then reviewed a detailed summary provided by Management of the Company’s performance and achievements provided by Management againstachievement of the additional performance measures described above and the targets associated with each measure and its associated targets as detailed above.of the performance measures. Our Chief Executive OfficerCEO assessed and scored each performance measure for the Compensation Committee’s consideration. Upon review and through detailed discussions, the Compensation Committee recommended final scores for each performance measure as detailed in the table below.

Based on the weighted scores for each of these measures, the Compensation Committee determined the final 20092010 performance score for the Company to be 133%133.5%.

Determining Performance Incentive Plan Payouts

In reviewing and approving the individual performance of the Chief Executive OfficerCEO and the other Named Executive Officers,NEOs, the Compensation Committee assessed Company and individual performance against the measures defined above. Based on this review, the Compensation Committee assessed the Named Executive Officer’sNEOs performance and set their overall completion and performance incentive planPerformance Incentive Plan payout in-line with the final 2009 performance score of 133% with the exception of Mr. Hall. Given Mr. Hall’s regional versus Company-wide responsibilities, the final performance score was adjusted slightly higher taking this into consideration. Thetheir overall performance, for each Named Executive Officerwhich is summarized below.

Paul Hanrahan, President and Chief Executive Officer (“CEO”)

Under Mr. Hanrahan ledHanrahan’s leadership, the Company delivered robust results in 2010, exceeding its financial and operational performance targets which are described above, closing key transactions, and meeting critical milestones to a very strong overall performance in 2009. In assessinggrow the Company. The Compensation Committee assessed the performance of Mr. Hanrahan against the Company’s goals in a number of areas including safety, cash flow, performance improvement and corporate performance.

In safety, the Compensation Committee gave considerationreviewed the Company’s progress in implementing a multi-year action plan to improve its safety performance, and accomplishments with respect to its full year safety results. The Compensation Committee also assessed AES’ financial performance relative to its cash flow metrics and considered the goals set for 2009.

contributions from Mr. Hanrahan, which led to over $1.2 billion in subsidiary distributions. In reviewingevaluating the Company’s safetyattainment of its performance improvement objectives, the Compensation Committee took into account the year-over-year improvement and a continued positive long-term trend in the key safety objectives that we measure. In assessing the Cash Flow metric, the Committee considered the critical and proactive actions taken by Mr. Hanrahan that contributed to the achievement of $1.25 billion in distributions from our subsidiaries, the largest amount recorded in the Company’s history. In reviewing the Company’s Performance Improvement measures, the Committee considered that the Company met theAES achieved its Key Performance Indicator targets and exceeded manysurpassed its goals for performance initiatives focused on increasing the efficiency of the other pre-established performance improvement goals.

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Company’s operations. In 2010, the Company’s construction program resulted in 777 MW of new thermal, and wind capacity being completed on budget, however the Company’s Maritza project in Bulgaria did not achieve commercial operation as planned. The Company also advanced construction on more than 2,000 MW of new power projects to be completed by the end of 2013.

In addition, in evaluating the Company’s Corporate Performance metric,achievements in terms of its corporate performance, the Compensation Committee considered Mr. Hanrahan’s role in strengthening the Company’s liquidity by improving the debt profilelooked at AES’ ability to close transactions and positioning the Company for growth. Under Mr. Hanrahan’s leadership,advance projects that provide immediate and longer-term growth opportunities. In 2010, the Company completed a number of transactions to fund future growth initiatives and signedincluding the closing of a binding$1.58 billion stock purchase agreement with China Investment Corporation (“CIC”). According to, and the agreement, CIC will invest approximately $1.6 billion in the Company to become a stockholder and a strategic partner. The Company also signed a non-binding lettersales of intent with CIC, whereby CIC would invest $571 million in exchange for a 35% interest in our wind generation business, including more than 1,500 MW in operation and under construction and a development pipeline of more than 6,600 MW. In portfolio Management, the Company reached agreements to sell our equity interests in the Lal Pir/Pak Gen

facilities in Pakistan, and AES Barka in Oman for $200and AES Ras Laffan in Qatar which generated combined proceeds of approximately $400 million. The available fundsCompany expanded its portfolio through the acquisition of Ballylumford, a 1,246 MW coal plant in Northern Ireland, created by these transactions will allowadditional options for growth through the agreement to form a strategic partnership with Koç in Turkey and purchased development pipelines for wind projects in the UK and Poland and hydro projects in China. In India, the Company to invest in opportunities to expandacquired a 39.2 MW wind project and closed a 5 MW solar project. AES Solar, the business.

Through itsCompany’s joint venture with Riverstone Holdings, LLC,brought 68 MW of new projects into commercial operation. In addition, the Company expanded its global platform of utility-scale solar photovoltaic (PV) projects from Spain into a numberbrought 8 MW of new markets.projects online in our Energy Storage business. In addition, Mr. Hanrahan maintained and created options that will enable the future growth of2010, the Company focused on corealso executed a long-term power projectspurchase agreement for the 1,200 MW Mong Duong II plant it is developing in Vietnam. The advances made and on extending our renewables business around the world.milestones achieved by the Company in 2010 helped strengthen AES’ long-term growth strategy.

Victoria Harker, Executive Vice President and Chief Financial Officer (“CFO”)

In 2009,The Compensation Committee reviewed Ms. Harker was responsibleHarker’s individual performance in 2010 based on her contributions to: (1) the achievement of strong overall financial results relative to the Company’s targets for the following: (1)year; (2) optimization of the enhancementCompany’s tax and capital structure; (3) value creation for the Company through financing, portfolio management and financial operations activities; (4) continued improvements of the Company’s financial processes, systems and controls; (2) implementation of initiatives aimed at increasing overall AES profitability as well as Finance functional effectiveness and efficiencies; (3) leadingcontrols. In assessing her performance, the Company’s efforts to improve liquidity; and (4) driving merger, acquisition and portfolio management asset sale activities.

Under Ms. Harker’s leadership, AES delivered timely financial statements for ten consecutive quarters, improved internal controls (after remediating all 10 materials weaknesses which existed in years prior to 2008), and implemented SAP and BPC budget systems to help account for the Company’s financial performance, with in-year improvement in forecasting of 20%, which enabled AES to meet and in some cases exceed key external financial metrics for 2009.

TheCompensation Committee also considered Ms. Harker’s role in the achievement ofleading the Company’s financial results. To improve liquidity during 2009,communications for the investment community and the media.

As a result of capital structure efforts in 2010, Ms. Harker’s led AES’Harker generated $100 million in cash tax savings and refunds and paid down parent company debt of approximately $1 billion. These efforts to extend the maturity date on $605 million of $750 million secured recourse revolving credit facilities from June 2010 to mid-2011 and to replace $600 million unsecured recourse credit facility expiring in March 2010combined with $500 million of long-dated bonds, during a period of extreme market volatility. Likewise,ongoing cash management efforts conducted in conjunction with operating company leadership in 2009 also generated $1.25 billion in distributions from subsidiaries.

activities helped the Company achieve strong financial results and exceed its associated objectives. Ms. Harker also supported ournumerous portfolio management activities in 2009 through2010 including the completion of a $1.6 billion binding stock purchase agreement with CIC, and the $200 million sale of the Company’s assets in Pakistan, Oman and Oman.Qatar.

Under Ms. Harker’s leadership, the Company initiated a stock buyback program and repurchased approximately $99 million of stock in 2010. In addition, Ms. Harker also led amendments to the Company’s senior secured credit facility, increasing the facility from $610 million to $800 million and extending the term through 2015. As part of this amendment, the Company’s first lien debt capacity increased from $1.75 billion to $3 billion, increasing future financial flexibility.

In addition, Ms. Harker continued to deliver timely financial reporting for 14 consecutive quarters, streamlined processes to improve the efficiency around financial close and audit, and continued to further automate the Company’s processes to increase the long-term effectiveness of its financial functions. Under Ms. Harker’s management, the Company has now completed implementation of its financial reporting and cash management systems.

Andres Gluski, Executive Vice President and Chief Operating Officer (“COO”)

In assessing2010, the Compensation Committee assessed Mr. Gluski’s overall performance in 2009, the Committee took into consideration the following factors: Mr. Gluski’srelative to his leadership role inin: (1) managing our global operations and contributingthe Company’s initiative to better its safety record; (2) AES’ favorable financial results in 2009; (2) sustainable cost reduction andthrough the management of our global operations; (3) the successful performance improvement efforts in the Company’s operating businessesbusinesses; and corporate services; and (3)(4) the expansion of our business platforms and the completion of projects under construction in 2009.2010.

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Mr. Gluski initiated a multi-year global campaign to advance the Company’s safety practices in 2010. As a result of these efforts, the Company successfully attained year over year improvements in its safety results, specifically in the reduction of Lost Time Incident (“LTI”) Case Rates for employees and contractors working at the operating businesses.

Under Mr. Gluski’s leadership, the operating businessesCompany achieved strong cash flow and operating results in 2010, which contributed tosurpassed the record dividendCompany’s goals for subsidiary distributions despite a number of challenging weather related factors, a major earthquake in Chile and adverse trends in commodity pricing. The improved performance of the 660 MW coal-fired Masinloc power plant in the Philippines, strong operating performance in Brazil generation and distribution and robust cash distributions of $1.25 billion from subsidiaries. In addition,collections in businesses such as the businesses completed over $1.2 billion in non-recourse financings.

KeyDominican Republic and Cameroon were key drivers of theoverall 2010 operational financial results.

The Company’s strong operating results were also supported by the implementation of performance improvement initiatives across its portfolio, including better usethe integration of AES’solid fuel and global synergies.

sourcing activities and the deployment of an asset management program to improve the efficiency of capital expenditures. Under Mr. Gluski’s leadership, in the operating group led toCompany improved commercial availabilityits equivalent forced outage (“EFOR”) rate and lower non-fuel operating and maintenancenet capacity factor (“NFOM”NCF”) costs in ourat its generation businesses and improved cash collections (measured in days sales outstanding oras well as the rate of non-technical losses (“DSO”NTL”) and operating and maintenancethe System Average Interruption Frequency Index (“O&M”SAIFI”) costs per customer metrics in ourat its distribution businesses.

Regarding the Company’s construction program, 777 MW of new thermal and renewable capacity were completed on budget; however the 670 MW coal-fired Maritza construction project in Bulgaria did not achieve commercial operation in 2010 as planned. Under Mr. Gluski’s management, the Company also achieved a strong year inadvanced construction completing 1,004on more than 2,000 MW of new capacity, encompassing both thermal power and renewables in seven countries. The Company also advanced the construction of more than 2,500 MW of thermal, hydro and wind power projects to be completed by the end of 2012,2013. Included in this construction pipeline is the 270 MW coal-fired Campiche project in Chile, which resumed construction in 2010 following the successful defense of which more than 1,400 MW are on track to be completed by the end of 2010.project’s environmental and construction permits.

Brian Miller, Executive Vice President, General Counsel (“GC”) and Corporate Secretary

The Compensation Committee assessed the personal performance of Mr. Miller relative to his 20092010 objectives. In determining thehis incentive awards, the Compensation Committee gave consideration to (1) the leadership role Mr. Miller played in effectively managing the Company’s complex and material global legal issues, including dispute resolution efforts; (2) the significant legal support provided for the Company’s financing, growth and portfolio management activities; and (3) his leadership of the Company’s corporate governance, corporate government relations, and ethics &and compliance initiatives. In addition, the Compensation Committee also gave consideration to Mr. Miller’s expanded responsibilities, including his new role as co-chair of the Company’s development steering committee.

Under Mr. Miller’s leadership, his team supported the Company’s capital structure initiatives by managing the legal matters pertaining to the negotiation and execution of major corporate transactions, including closing of the CIC agreement, refinancings,transaction, refinancing of the Company’s senior secured credit facility, redemption of Second Lien notes, and other subsidiary financings and corporate transactions described above.transactions. In addition, Mr. Miller provided substantial legal support in the sale of assets in the Middle East and the establishment of the Company’s joint venture with Koç in Turkey.

Mr. Miller and his team played a leadership and support roleroles in advancing the Company’s growth and development activities. In his position as co-chair of the Development Steering Committee, Mr. Miller serves as a member ofleads the Board of Directors of AES Solar, the solar photovoltaic joint venture with Riverstone Holdings LLC, which financedCompany’s development efforts in North America, Latin America, Europe and closed a number of solar projects in 2009.Africa. Mr. Miller also joinedis on the Board of DirectorsBoards of AgCert International Limited, a wholly-ownedAgCert Canada Holding Limited and AES subsidiary that produces and sells greenhouse gas emissions credits from agricultural sources on an industrial scale.Solar Energy, Ltd. In addition, Mr. Miller and his team also provided legal support for the development efforts of AES Wind Generation. Under Mr. Miller’s leadership, his team continues to provide legal support for the Company’s projects under construction and other development activities.

The Compensation Committee also considered the fact that the dispute resolution work of Mr. Miller and his team yielded favorable results for the Company.

TheIn addition, the Compensation Committee also considered Mr. Miller’s other responsibilities with the Company. In his role as Corporate Secretary, Mr. Miller continued to lead the Company, in leading matters related to corporate governance. Mr. Miller also leads the Company’s Corporate Government Relations team. As Acting Chief Compliance Officer for part of 2009, he led the Company’s Ethicsgovernance, corporate government relations and Compliance Program.ethics and compliance.

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Edward Hall,Andrew Vesey, Executive Vice President and Regional President (“RP”), NorthLatin America and Wind& Africa

TheMr. Vesey’s performance in 2010 was evaluated by the Compensation Committee assessed the performance of Mr. Hall relative to his 2009 objectives. Specifically,objectives for the following factors were taken into consideration byyear to determine his incentive awards. The Compensation Committee considered Mr. Vesey’s contributions to (1) the Committee in determining his compensation: (1) his management of the North America region in an extremely challenging market; (2) hisoverall leadership of the wind generation business;Company’s operations in Latin America and Africa; (2) the resolution of the issues around the 270 MW Campiche construction project in Chile; and (3) his rolethe efforts to resolve challenges at the Company’s business in Cameroon, AES Sonel.

In 2010, the developmentLatin America and management of our Energy Storage and Greenhouse Gas Services (“GHGS”) businesses.

Our businesses in North America were significantly impacted by the market conditions in the US. In response, Mr. Hall initiatedAfrica Region faced a number of cost reductionspressing issues as a result of weather-related conditions: an earthquake in Chile that impacted the Company’s operations in the country and performance initiativesseriously reduced energy demand, droughts in Colombia and Panama that significantly helped offset the potential impact which resultedaffected its hydro operations in significant financial benefits for the region.

these countries, and record-setting rains and floods in El Salvador, Brazil and Argentina that affected our distribution businesses. Under Mr Hall’sMr. Vesey’s leadership, the Wind business commencedRegion overcame all of these challenges and recorded strong operational and financial performances, meeting or exceeding the majority of its performance targets.

Mr. Vesey and other Executives also successfully led efforts to regain the approvals and permits needed to recommence construction of 13 projectson AES Gener’s 270 MW coal-fired Campiche project in 5 countries totaling 547 MW. In addition, under his leadership, AES Wind completed construction of 5 projects in 3 countries-all on time and on budget. Over the course of the year,Chile. Under Mr. Vesey’s management, the Company’s wind generation capacity grew to more than 1,500 MWbusiness in operation and under construction withCameroon, AES Sonel, executed a development pipelineseries of more than 6,600 MW. The Committee also considered Mr. Hall’s role in the successful renegotiation of the Company’s agreements to purchase wind turbines as market conditions changed and in the signing of a non-binding letter of intent with CIC to purchase a 35% stake in our wind generation business for $571 million.

Mr. Hall was responsible for the expansion of the Company’s Energy Storage business with the commercial operationgovernment and its lenders to facilitate its receipt of a 12 MW battery storage unitfinancial compensation totaling $22.4 million for differences in Chile. Indianapolis Power Light,tariff levels as anticipated under the Company’s distribution business in Indiana, also received a $20 million SmartGrid grant from the U.S. DepartmentAES Sonel’s Concession Agreement for 2010 and 2011, and its final loan disbursement of Energy to install an advanced meter system. In addition, the Committee considered Mr. Hall’s role in the restructuring of GHGS to both reduce costs and redirect the development focus to lines of business that generate current revenues while retaining upside potential from future carbon offset sales.roughly $80 million.

The following are the targeted percentages of base salary and actual payout as a percentage of targets approved by the Compensation Committee for each Named Executive Officer’s 2009NEOs 2010 Performance Incentive Plan award. The amount paid to each Named Executive Officer is stated in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, on page 33 of this Proxy Statement for each Named Executive Officer and is also identified in footnote 4 to that table.

The threshold, target and maximum pay-out levels offor the 2010 Performance Incentive Plan awards forgranted to the CEO and each Named Executive OfficerNEO are shown in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns of the Grants of Plan-Based Awards Table on page 3540 of this Proxy Statement. The actual payouts to the Named Executive OfficersCEO and each of the NEOs for 20092010 are set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 3338 of this Proxy Statement.

20092010 Long Term Compensation Grants

As in previous years, the allocation of Long Term CompensationLTC components granted in 2009 is2010 was based on the Company’s review of market practice and is aligned with the Company’s stockholderStockholder value-oriented philosophy.

During 2009, the

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The following factors were considered in granting long-term compensation awards to Named Executive Officers:the CEO and NEOs in 2010: (1) 2010 Survey Data detailing the level of equity-based compensation paid to executivesExecutives in comparable positions;positions at other comparable companies; (2) overall Company performance; and (3) individual or personal performance and the NEO’s future prospects with the Company; and (3) overall Company performance.Company. The following awards were made in 2010:

As previously discussed, the Long Term Compensation awards provide a mix of cash- and equity-based awards in the form of Performance Units, Performance Stock Units and Stock Options, respectively. The Performance Stock Units and Stock Options are equity-based and make up 50% of the 2009 Long Term Compensation opportunity. The Performance Units are cash-based and are measured by CVA. Each year, the Committee approves the CVA target that determines the Performance Unit target associated with the Long Term Compensation opportunity award for that performance period. Early in 2009, the Committee approved the 2009 CVA target of $6,522 million which was based on (1) our 2009 financial budget and (2) our long-term forecast. As previously discussed, any changes to our CVA target are made against pre-defined adjustments.

Information regarding the amounts and values of the 2010 LTC Plan awards is provided in the Summary Compensation Table and the Grants of Plan-Based Awards Table on pages 3338 and 3540 of this Proxy Statement.

Payout of Awards Maturing at the End of 20092010

Performance Units

The Performance UnitsPUs granted in 20072008 reached maturity at the end of 20092010 and will be paid to participants in 20102011 based on our CVA performance during the three-year period of 2007-2009.2008-2010. During that period, our performance was above threshold, but below the pre-determined CVA target. Payout of these units is $0.7304$0.6832 per unit, which is below the initial value of $1.00 per unit. The payout is based on a final 2008 CVA target of $6,363 and final achievement of $5,960. The below target payout reflects the fact that this award is performance-based and at-risk.

The payment of the 2007 Performance Unit2008 PU awards is reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 3338 of this Proxy Statement. The amount paid to each Named Executive OfficerNEO is set forth in footnote 4 to that table.

Performance Stock Units

The Performance Stock UnitsPSUs granted in 20072008 did not vest at the end of 20092010 because our TSR did not achieve the 40^th percentile of the S&P 500 over the 2007-20092008-2010 measurement period. As this compensation component is designed to tie directly to our stock price performance over a cumulative period and therefore representalign with the interests of our stockholders,Stockholders, the 20072008 grants will behave been forfeited and have no future value. The original grant date value of the Performance Stock UnitsPSUs that were forfeited and the earned value for the CEO and each Named Executive Officer isNEO are detailed in the table below.

Stock Options

Stock OptionsSOs granted in previous years to Named Executive Officersthe CEO and NEOs only had value at the end of 20092010 to the extent they were issued at an exercise price below our 2009 ending2010 closing stock price. The majority of our SOs, with the exception of the 2003, 2004 and 2009 grants were underwater as of December 31, 2010, and therefore were valued at $0 as of year-end.

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Other Relevant Compensation Elements and Policies

IncludedIncluded:

Perquisites and Other Benefits

As detailed in the section titled “Overview of our Compensation Elements” on page 2022 of this Proxy Statement, the Programcompensation program does not rely on perquisites to achieve its objectives. Information regarding the value of theWe do not provide perquisites AES provided to its Named Executive Officers in 2009 is providedour NEOs except for our CEO who receives a company car and driver. These amounts are included in the “AllAll Other Compensation”Compensation column of the Summary Compensation Table on page 3338 of this Proxy Statement. Consistent with the Program’sprogram’s objective to be competitive in the marketplace and to retain talented people such as our Named Executive Officers,NEOs, the Supplemental Retirement Plan and the Restoration Supplemental Retirement Plan provide additionalare used to restore benefits that are limited under our broad-based retirement benefitsplans due to certain individuals.statutory limits imposed by the Code. Additional information regarding the Supplemental Retirement Plan and the Restoration Supplemental Retirement Plan is contained in the “Narrative Disclosure Relating to the NonqualifiedNon-qualified Deferred Compensation Table” beginning on page 4247 of this Proxy Statement.

Share Ownership Guidelines

Our Board of Directors, based upon our Management’s and Compensation Committee’s recommendations, adopted share ownership guidelines in 2010 that became effective in January 2011. These guidelines promote our objective of increasing Stockholder value by encouraging our Executives to acquire and maintain a meaningful equity stake in the Company.

The guidelines were designed to maintain share ownership at levels high enough to assure our Stockholders of our Executives’ commitment to value creation. Under these guidelines, Executives, including our CEO and each of our NEOs, are expected, over time, to acquire and hold shares of our common stock equal in value to a multiple of their annual salaries. Shares owned directly, shares beneficially acquired under our retirement plans and shares deferred until termination of employment count toward satisfying the guidelines. Unexercised SOs and unvested PSU and RSU awards do not count towards satisfaction of the guidelines. Each Executive is expected not to sell any of his or her shares in the Company until the guidelines have been satisfied. In addition, 67% of any future net shares (net of option exercise price and/or withholding tax) received must be retained and cannot be liquidated until the Executive’s guideline has been met. The current share ownership guidelines for our CEO and NEOs are as follows:

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Change-in-Control, Employment and Severance Arrangements

Change-In-Control

Under the Program, “change-in-control”program, Change-in-Control and severance benefits are provided to our Named Executive OfficersCEO, NEOs and certain other employees. In the case of our Named Executive Officers,CEO and other NEOs, the Compensation Committee believes that these benefits reflect the competitive marketplacemarket place for executive talent and are in line with similar arrangements that other companies have in place with executivesExecutives in comparable positions. The Compensation Committee reviewed change-in-control agreements in 2008 and again at the end of 20092010 as part of its annual review of market practices for executive compensation. An analysis performed by Hewitt confirmedcompensation and determined that the practices we use are consistent with those of other companies’ practices and are aligned with the evolving market.companies practices. In addition, we evaluate our severance plan and arrangementsthe AES Corporation Severance Plan (“Severance Plan”) from time-to-time to ensure market alignment through the review of general industry data and information included in annual Proxy Statements for executiveswith respect to Executives in comparable positions. We undertake this review in order to ensure our Severance Plan aligns with general market practice. As a result of our recent review, the Company amended the Severance Plan to clarify that Executives Officers who first become eligible to participate in the Severance Plan beginning on or after December 31, 2009 will not receive excise tax gross-up benefits.

The purposes of these change-in-control arrangements are to:

Vesting of Awards Upon Change-in-Control

Consistent with the Stockholder-approved Long Term CompensationLTC Plan, the Compensation Committee determined to retain change-in-control provisions in each of the Performance Unit, Performance Stock Units, Stock OptionsPU, PSU, SO and Restricted Stock UnitRSU award agreements. Upon a change-in-control, the unvested portion of the Performance Units, Performance Stock Units, Stock Options,PUs, PSUs, SOs, and Restricted Stock UnitsRSUs will vest. The purpose of this accelerated vesting in addition to those outlined above, is to ensure that we retain our Named Executive OfficersNEOs prior to and through the change-in-control. ForIn both the same reasons, we provide change-in-control protection in our Severance Plan.PU and the PSU agreements, the target number of units granted would become vested upon a Change-in-Control.

Change-in-Control Benefits Tax Gross-Up

If a change-in-control of AES causesThe Employment Agreements (“Employment Agreements”) with our CEO, CFO and COO, and our Severance Plan for our NEOs provide that, if it is determined that compensation including(including performance-based compensation such as the Performance Incentive Plan or LTC Plan awards,awards) is to be paid by AES to or accelerated,for a disqualified individual potentially could receive “parachute payments”NEO’s benefit, would constitute an “excess parachute payment,” as described within the meaning of Section 280G and Section 4999 of the Internal Revenue Code, of 1986, as amended “The Code”. Pursuant to Section 4999, a disqualified individual can be subject to a 20% excise tax on excess parachute payments. Similarly, under Section 280G of the Code, AES can be denied a deduction for excess parachute payments.

The employment agreements with our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, and our Severance Plan provide that, if it is determined that any payment or distribution by AES to or for the Named Executive Officer’s benefit would constitute an “excess parachute payment”, AES will pay to the disqualified person a gross-up payment, so that the net amount retained by the disqualified person, after deduction of any excise tax imposed under Section 4999 of the Code and other taxes, will be equal to the payments or distribution we were required to make. Gross-up payments will not be deductible by AES. We included these gross-up provisions in each of the employment agreementsEmployment Agreements and in the Severance Plan after a review of the prevailing market practices at the time the contracts were put in place. As already stated, thepractices. The Compensation Committee determined in 2009 that any new or materially amended employment agreementsEmployment Agreements will not include tax gross-up provisions going forward.and no new Executive Officers participating in the Severance Plan from December 31, 2009 will have a 280G tax gross-up benefit.

The vesting of Performance Units, Performance Stock Units, Stock Options,PUs, PSUs, SOs, and Restricted Stock UnitsRSUs, and the ability of the Named Executive OfficersNEOs to exercise or receive payments under these awards are affected by termination of their employment and by a change-in-control.Change-in-Control. These events, and the related payments and benefits are described in “Additional Information Relating to Potential Payments Upon Termination of Employment or Change-in-Control” beginning on page 4849 of this Proxy Statement.

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Employment Agreements

Our Chief Executive Officer, Mr. Hanrahan, Chief Financial Officer, Ms. HarkerCEO, CFO and Chief Operating Officer, Mr. Gluski,COO have employment agreements (“Employment Agreements”)Agreements in place that were approved prior to 2009.2010.

Each of the Employment Agreements automatically renews for an additional one-year period on January 1^st of each year unless either the Company or the Named Executive OfficerNEO gives a notice of non-renewal at least six months prior to the renewal date. The Employment Agreements provide the Named Executive OfficersNEOs with a base salary that may be increased, but not decreased. The Employment Agreements also permit each Named Executive OfficerNEO to participate in all of our Long Term CompensationLTC and employee benefit plans on a basis no less favorable than our other Senior Executive Officers.

In addition, the Employment Agreements provide Mr. Hanrahan, Ms. Harker and Mr. Gluskiour NEOs with the right to receive certain payments and to continue to receive certain benefits after the termination of their employment. These events and the related payments and benefits are described in “Additional Information Relating to Potential Payments upon Termination of Employment or Change-in-Control” beginning on page 4849 of this Proxy Statement.

Severance Plan

The Compensation Committee adopted athe Severance Plan in 2006 to define the severance benefits forprovided to our US-based, non-union employees who have completed one year of service with the Company. The planSeverance Plan has been subsequently amended from time to time. Mr. Hanrahan, Ms. HarkerOur CEO, CFO and Mr. GluskiCOO do not participate in the Severance Plan, as severance benefits are provided for each of them in thetheir Employment Agreements.

The Severance Plan provides the other Named Executive Officers withoutNEOs, who do not have Employment Agreements (Mr. Miller and Mr. Hall)with the Company and other eligible employees with severance payments and benefits in the event their employment is involuntarily terminated under certain circumstances. The section titled “Additional Information Relating to Potential Payments upon Termination of Employment or Change-in-Control” can be found beginning on page 4849 of this Proxy Statement.

IRS Section 162(m)

The Compensation Committee also considers and evaluates the impact of applicable tax laws with respect to compensation paid under our plans, arrangements and agreements. For instance, with certain exceptions, Section 162(m) of the Code limits our deduction for compensation in excess of $1 million paid to certain covered employees (generally our Named Executive Officers)CEO and three other highest paid NEOs). Compensation paid to covered employees is not subject to the deduction limitation if it is considered “qualified performance-based compensation” within the meaning of Section 162(m) of the Code. While the Compensation Committee generally intends to structure and administer our Stockholder approvedStockholder-approved compensation plans so as not to not be subject to the deduction limit of Section 162(m) of the Code, the Compensation Committee may from time to time, where it believes it is in the best interests of our Stockholders and to remain competitive in the marketplace for talent, approve payments that cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs. Additionally, if any provision of a plan or award that is intended to be performance-based under Section 162(m) of the Code is later found to not satisfy the conditions of Section 162(m), our ability to deduct such compensation may be limited. Our performance-incentive planPerformance Incentive Plan and LTC Plan are currently designed to enable us to comply with the tax deductibility requirements under 162(m).

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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with AES’ Management and, based on this review and discussion, recommended to the Board that it be included in AES’ Proxy Statement and incorporated into AES’ Annual Report on Form 10-K for the year ended December 31, 2009.2010.

The Compensation Committee of the Board of Directors:

Philip A. Odeen, Chair

Samuel W. Bodman, III

Kristina M. Johnson

John A. Koskinen

Risk Assessment

We believe that the general design of our compensation program reflects an appropriate mix of compensation elements and balances current and long-term performance objectives, cash and equity compensation, and risks and rewards associated with our Executives’ roles. The following features of the program illustrate this point:

During 2010, with the assistance of its independent advisor, the Compensation Committee analyzed all of the Company’s compensation programs from a risk perspective. In that review, Meridian identified several risk mitigators such as:

We added additional risk mitigators by implementing share ownership guidelines in early 2011 and adjusting the Officer LTC program for 2011 to better align with our Stockholders’ interests. We believe these mitigators help to ensure that our compensation program encourages appropriate risk-taking while mitigating potential damage to the Company.

Because of the presence of the risk mitigators identified above and the design of our compensation program, we believe that the risks arising from our employee compensation program is not reasonably likely to have a material adverse effect upon AES.

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Summary Compensation Table (2009, 2008(2010, 2009 and 2007)2008)*

The following Summary Compensation Table contains information concerning the compensation we provided in 20092010 to Paul Hanrahan, our Chief Executive Officer,CEO, Victoria Harker, our Chief Financial Officer,CFO, and our next three most highly compensated executiveExecutive officers for 2009.2010. Collectively, these individuals are our Named Executive Officers.NEOs.

NOTES:

financial statements, or Management’s Discussion & Analysis, as appropriate, contained in our Annual Report on Form 10-K (footnote 16) for the year ended December 31, 20092010 (“AES’ Form 10-K”) which also includes information for 20072008 and 2008. 2009. The value reported for 2008 has been updated from the 2010 Proxy Statement to eliminate the impact of assumed forfeiture rates in estimating the Fair Market Value.

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Based on the share price at grant and assuming the maximum performance conditions are achieved, the maximum value of the Performance Stock UnitsPSUs granted in fiscal year 20092010 and payable following completion of the 2009-20112010-2012 performance period are shown below.

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In the case of Mr. Hanrahan, this includes an amount related to his annual automobile and driver perquisite. In fiscal year 2010, the annual automobile and driver perquisite provided to Mr. Hanrahan had a value of $16,679 based on our incremental cost to provide the automobile. The incremental cost of Mr. Hanrahan’s personal use of the automobile and driver is calculated as a portion of the cost of the annual lease and driver attributable to his personal use.

Grants of Plan-Based Awards (2009)(2010)*

The following table contains information concerning the awards granted to each grant of an award we madeour NEOs in 2010 under our plans in 2009 to the Named Executive Officer.various compensation plans.